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Many companies listed on the Dhaka Stock Exchange have had failed to declare dividends, pay minimal amounts or delayed payments to shareholders causing harm to both investors and the overall capital market.

This troubling trend is raising serious concerns about corporate governance and financial transparency.

Dividends are crucial for shareholders, serving as a primary return on investment. For many retail investors, especially those relying on consistent payouts, these payments are essential for financial stability.

Analysts pointed out that the growing disregard for dividend obligations negatively impacts both investors and the capital market.

‘This lack of dividend payments shakes investor confidence. If they witness that companies are not paying or declaring dividends for a continuous period, they tend to shift from the capital market,’ said Md Musa, a capital market analyst and professor of United International University.

He added that some companies refrained from declaring or disbursing dividends due to legitimate reasons like operational losses or financial difficulties.

‘However, some others intentionally avoid payouts to conceal profits or manipulate internal cash flows,’ he alleged.

‘The overall performance of the capital market sees negative growth with such practices,’ he said.

Most companies engaging in these practices are listed in the DSE’s ‘Z’ category, which is reserved for poorly performing entities. However, some companies from higher categories also engage in similar activities.

In September, the DSE downgraded 29 companies to the ‘Z’ category for failing to pay proper dividends over the past two years.

On November 10, the Bangladesh Securities and Exchange Commission announced it would fine directors of 10 listed companies if they failed to distribute undisbursed dividends by December 15.

According to data on the DSE website, many companies habitually declare no dividends or refrain from announcing them altogether. This raises questions about their financial stability and the intentions of their management.

‘This practice deprives investors of benefits and results in their suffering. They get penalised for the wrongdoing of company management, which ultimately hurts investor sentiment,’ said SM Galibur Rahman, head of research and investment strategy at Shanta Securities.

According to experts, dividends symbolise a company’s success, as only profitable entities can consistently issue them. The lack of dividends not only erodes trust in companies but also undermines the capital market’s appeal, making it harder for firms to raise funds for expansion.

Mominul Islam, chairman of the DSE, highlighted that globally, companies failing to meet dividend obligations were often delisted and their assets liquidated to compensate investors.

‘For example, India takes very strict measures against such companies. The concerned companies’ management is barred from re-enlisting, opening new institutions or even accessing bank loans,’ he said.

‘However, we don’t yet have such provisions. We are working on establishing a improved process for delisting companies while ensuring investor safety,’ he added.

Mominul also pointed out issues with financial performance audits in the country.

‘Whether a company is in a bad or good situation can be identified through audits, but our auditing process is unreliable. Many firms blacklisted by us are still active on the BSEC’s list. We will soon submit a proposal to the regulator for a collaborative approach to address this,’ he said.